The Latte Factor

“Beware of little expenses. A small leak will sink a great ship.” – Benjamin Franklin.

You’re probably familiar with “the latte factor,” a term that refers to the big impact that little expenses can have on your bottom line. The idea is that small expenditures can add up to big savings if you’re willing to forgo (or modify) a few little indulgences along the way.

Let’s take latte, for example. A small daily latte at Tim Horton’s will set you back about $2, or $10 per week, if you buy one every work day. That might seem like a bargain compared to Starbucks, but if convenience is what you want, it would be more economical to buy a Keurig, which allows you to brew individuals cups of your coffee drink of choice. After you’ve paid for the machine, each K-cup costs you about 55 cents—pennies per cup instead of dollars. Keep your indulgence, pour it in a to-go mug, and you’re on your way, only a richer this time.

Here are some other ways to save without completely giving up the things you love.

Check your channels. Premium cable and satellite subscriptions can cost anywhere from $500 to over $1,000 per year or more. If you find that you’re not using the premium channels that often, why not downgrade? It just takes a phone call and it can save you hundreds over the course of the year.

Trim your subscriptions. Do you subscribe to magazines that you rarely have time to read? A DVD rental service that you barely use? Or a gym membership you’ve forgotten about? These subscriptions can slowly drain hundreds of dollars from your account every year—anything that’s set up on automatic withdrawal/payment can. Individually, they might not seem costly. But over time, it can add up to the price you’d pay for a nice vacation. Evaluate what you really use and don’t use and cancel the rest this week.

Avoid bank fees. Banks change products and terms of agreement all the time—you may be paying a monthly fee without thinking twice about it. On top of monthly account fees, watch out for fees associated with overdraft protection, paper statements or excessive transactions.

Cut back on eating out for lunch. We’re not going to say never eat out—that’s unrealistic for many business professionals. But did you know that spending only $6 a day on lunch can cost nearly $800 per year? If your spouse spends the same amount, that’s almost $1,600 a year just on lunch. And that’s for cheap lunches. Even if you just bring lunch twice a week, say Tuesdays and Thursdays, you’ll still save hundreds over the course of the year. Not only that, but you’ll likely save on calories as well.

Final Tip: Pay your bills on time. This isn’t really about an “indulgence,” but you’d be surprised how many busy people let deadlines and due dates slip by. Late fees can be substantial, ranging anywhere from a few dollars to $40 or more. If you have trouble keeping track of due dates, sign up for automatic electronic payment plans.